Many countries, including the UK, are focusing on assets hidden in offshore accounts in an attempt to increase revenue however many factors affect the success, or failure, of initiatives to encourage residents to repatriate wealth. These factors include: changes in the home country; attractiveness of the amnesty; frequency of amnesties in the country concerned; enforcement powers relating to non-compliance and how well such enforcement measures are publicised.
As an example the recent Italian amnesty which, being the 3rd in eight years, might not have attracted many disclosures. However a very low 5% tax on assets declared, anonymity, the ability to keep the money abroad if in the European Economic Area and immunity from prosecution coupled with highly publicised enforcement measures have resulted in success.
On the other hand the UK’s amnesties have proved much less attractive because they require full disclosure of all undeclared assets, payment of outstanding taxes, interest and a 10% penalty. This, combined with poor publicity and as yet unseen enforcement action, has so far failed to persuade large numbers of taxpayers to come forward.
Governments will doubtless continue to target offshore funds as sources of potential revenue. Given the increase in international exchanges of information, it is likely that private individuals will find it more and more difficult to continue to hide assets abroad. Governments will certainly capitalise on this opportunity and will maximise the revenue obtained from undeclared assets that are discovered by imposing large penalties in addition to the tax and interest due.
Although some of the factors affecting the success of an amnesty can be identified, whether or not it is attractive may only become clear with hindsight. Companies or individuals who may be affected are advised to take professional advice sooner rather than later.
